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Australia's Suncorp pays premium to build 19.99% stake in Tower

Wednesday 15th March 2017

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ASX-listed insurer Suncorp Group raised the stakes in its takeover tilt for NZX-listed general insurer Tower, paying an ever larger premium to build its stake to 19.99 percent. 

The Australian parent of local insurers Vero Insurance and Asteron Life paid $1.40 a share for 11.3 million shares from Australian fund manager Perpetual yesterday, more than the $1.30 put forward to Tower in an indicative offer, and what it had previously paid to build a 13.3 percent stake. 

Tower chairman Michael Stiassny noted the latest move, saying shareholders should still wait until the board comes back with a recommendation before deciding to sell, and that the insurer's directors would expect that higher price to be paid to all investors. 

"We would expect all shareholders to benefit equally from a sale and will be asking Suncorp to advise whether it intends to employ differential pricing in its proposal," Stiassny said in a statement today. "In addition, we will seek to clarify aspects of the highly conditional nature of their indicative scheme proposal."

Suncorp's initial $1.30 a share offer put a $219.3 million price tag on Tower, trumping a $197 million deal already on the table to sell to Canada's Fairfax Financial Holdings at $1.17 apiece. That deal had the board's blessing and support from major shareholders Salt Funds Management and Accident Compensation Corp, however Suncorp's bid has secured sales from Perpetual and New Zealand Funds. Meantime, UBS has taken advantage of the takeover tussle to increase its stake to 9.1 percent. 

Stiassny said Tower's board is still in talks with Fairfax Financial about the earlier deal and "other transaction possibilities" and will "update the market on any further material developments as the circumstances require".

The general insurer posted a loss of $22.3 million in the September 2016 year as lingering claims from the Canterbury quakes were taking longer and were more expensive to settle. Last year it said it would corral those claims into a separate entity called RunOff, and suspended its annual dividend to preserve capital for the new company. It was also weighing up funding options or finding partners to help with the split.

The shares closed at $1.37 yesterday, up from 79 cents before the Fairfax Financial deal was announced last month. 

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